Exchange Rate, Marginal q and Investment Behavior of Small and Medium-Sized Enterprises in Japan: Time Series Evidences of Manufacturing Industries

In this paper, we investigate Grangerfs causality among the exchange rate, Tobinfs marginal q, and investment-capital ratio with quarterly data on firms categorized small and medium-sized enterprises (SMEs) in Japan. We utilize the data of following industries: chemical, iron and steel, production machinery, electric machinery and equipment, automobile and accessories and all manufacturing. The empirical results we obtain show that the null hypotheses of no Grangerfs causality from the exchange rate to other variables, investment and marginal q, are accepted in all industries. The reason is the lower percentage of export by SMEs. Thus, it is considered that the effects of Abenomics on SMEs are limited, and that other kinds of reflation measures for SMEs are needed.